An Irish Times guide to the world of personal finance.

SSIAs

I am trying to set up a special savings incentive account for my disabled son. He has €5,000. I want to put this amount in an account such as Northern Rock's 30-day notice account, or similar, with a good interest rate and drip-feed it into an SSIA. Northern Rock tells me it can do this for customers, internally - i.e. not to an external account. This seems convenient, as I don't have a lot of energy for active manipulation of funds. Also, should he spread the monthly payments to the SSIA over the five years (60 payments) or do it over a shorter time span with larger payments until the €5,000 is used up? Or have you a better option that is as simple as possible?

Ms T.L., e-mail

There is no technical reason why you should not be able to drip-feed from any bank account into the special savings account scheme, although I can see that it might require more active involvement in moving your money than you feel you would have the time or energy to undertake. In that case, the Northern Rock deposit account is not a bad choice and its SSIA offering does undertake to match the European Central Bank rate. If you go this route, you would need to eke out the payments - a minimum of €50 a month. Otherwise, you would get poorer terms on the SSIA.

My advice would be to frontload the payments, if possible - i.e. pay the maximum monthly amount at the outset - so that you get the money into the SSIA as fast as possible where it and the accompanying Government contribution can earn interest. After all, the €5,000 would allow you to make 19 payments of €254 - the maximum monthly payment allowed. Who knows whether a year-and-a-half down the line your son may have further savings available to him to invest further in the scheme?

However, to do this you would need to look outside Northern Rock because your payments might not continue beyond 19 months, jeopardising the rate of interest on the account. Alternatives would include ACC; however, the interest it would pay on your son's savings before they go into the SSIA would not match Northern Rock.

You will need to check with the institutions to see how the figures tot up - and also whether you can drip-feed from a Northern Rock demand deposit or 30-day account into aACC SSIA.

I am currently working in the Republic and hope to open a special savings incentive account. However, I also hope to take up to one year's leave of absence from my job to travel. I will not be working during this time. Will this prevent me from taking out an SSIA?

Ms M.L., Galway

What counts in terms of opening a special savings incentive account is what your position is at the time. As of now you are working and paying tax here and so should have no trouble opening an account - not that you need to be working.

All that matters is that you are resident in the Republic for tax purposes, should you have any eligibility for tax.

Taking a year out to travel should not affect your situation as long as you organise your direct debit to ensure the monthly payments are made to the SSIA. You would need to be out of the State for a good deal longer for your tax residency to be at risk.

Is it correct to assume that if I invest £200 a month for five years in an ACC fixed deposit account, my returns are likely to be as good as an equity investment? It is most unlikely that my savings will exceed five years. Is a variable account likely to be any more advantageous assuming a constant £200 per month investment?

Ms M.H., e-mail

As always when it comes to investment, there are as many views as there are voices. However, it is true to say that the majority view -- for people looking to save only for the five-year special savings incentive scheme period - the better option is the deposit account. Most of those arguing in favour of equity-based funds are linked in some ways to that side of the investment industry and, even then, many presume the savings will be left for longer than the minimum term.

As to whether it would be more advantageous to invest in a variable or a fixed-rate deposit account, there is no consensus. Put simply, you are taking a gamble either way. If you go for the fixed rate - and the current rate makes it reasonably attractive - you are betting that, in the case of ACC, variable interest rates over the five years will not average more than 4.5 per cent.

It is generally accepted that interest rates are likely to rise in the next few years.

At the moment, the European Central Bank benchmark rate, which ACC has guaranteed to match with its variable rate, stands at 3.25 per cent. The question is whether the rate will rise enough to make it worth the punt on the variable rate and only you can decide that.

It is worth noting that, at the time the rate was reduced to that level last November, some economists were talking of rates falling to 2.5 per cent by spring 2002. That is not going to happen but it does illustrate the difficulty of gauging how interest rates will move over a five-year period.

I was curious to read your recent reply to Mrs. E.F. from Northern Ireland regarding her eligibility to partake in the SSIS. I too live in Northern Ireland but am in full-time employment in the Republic, where I pay income tax and PRSI.

However, I have been unable to get any financial institution to accept me into the saving scheme because I am not resident in the Republic. The Revenue Commission helpline for the scheme (in Limerick) has also stated that I am ineligible due to my residency in Northern Ireland. How can I clarify the position as I would like to join the scheme?

T.T., e-mail

I am sorry to say that, yet again, I have fallen victim to the vagaries of double-taxation agreements. It appears you pay all your tax in the Republic, and in all other ways qualify for the special savings incentive scheme, but you are not in fact eligible. You are, according to the Revenue, tax resident in Britain and merely pay tax in the Republic under specific provision of the double-taxation agreement between the two states.

As such, I gather you will not be allowed take out on of these accounts. Sorry for the false hope.

Please send your queries to Dominic Coyle, Q&A, The Irish Times, D'Olier Street, Dublin 2 or e-mail to dcoyle@irish-times.ie. This column is a reader service and is not intended to replace professional advice. Due to the volume of mail, there may be a delay in answering queries. All suitable queries will be answered through the columns of the newspaper. No personal correspondence will be entered into.